24 Apr Tax Reform – the Good and the Bad for Truck Drivers
Several things have changed with the latest tax reforms for every type of profession, including truck drivers.
As several things would interest truck drivers, we wanted to give you an overview of all the good and the adverse effects of tax reforms on your profession.
Per Diem Allowance
Per diem is no more. However, per diems were eliminated for employee truck drivers only – i.e., all drivers who get a W2 wage statement from their bosses annually. When it comes to owner-operators, they can still get per diem deductions that amount to most of the per diem rate that’s usually $66 per day.
It is probably a lousy change for many people, but a lot of companies are ramping up their per diem plans which are sponsored with the company funds.
The new reforms have brought some changes for the bottom tax brackets. People in these brackets have lower tax rates now.
If that weren’t enough, most drivers would be happy to know that you no longer have to worry about listing itemized deductions. There’s a more standardized version of the deductions which has now been doubled in most cases.
As for businesses:
- C-corporations have much lower tax rates.
- Sole proprietorships, S-corporations, and partnerships pay taxes at individual income rates as most of the business in these types of companies flows through the owners.
- Limited liability companies or LLCs are treated as partnerships if they have two or more members. If they have a single member, then they are taxed as sole proprietorships.
As of 2018, businesses can deduct 100% of a commercial truck or any other equipment purchase, all as bonus depreciation – which is necessarily a type of deduction. Before the reforms, this percentage was only at 50%.
It is good news for everyone, but the depreciation will not last forever, it will drop to 80% in five years.
Net Operating Loss
The new reform affects businesses which are losing money because now a company can forward its net operating loss for an unlimited amount of time. Before the changes, the limit was 20 years.
In the end, it’s worth two additional things when it comes to loss:
- The amount of the loss can no longer be carried back, nor can it be used to offset income tax which was owed in previous years.
- The amount of the loss cannot be used to offset 100% of taxable income of the business but only 80% instead.
These changes need to affect the overall strategy of your business. It’s now better to plan a smoothing out of income over several years. There’s no point in creating significant losses if you don’t know that they will benefit you.
If you’re interested in going deep into the tax reforms, you can see all the changes affecting your profession in greater detail in this free ebook.
As for any additional assistance you might need with tax resolution, you can contact Golden Tax Relief at any time.